7. Institutions and Behaviour: New Rules of the Game

Institutional economics places great emphasis on establishing better institutions or ‘rules of the game’ as the necessary basis for economic growth and policy-making. While agreeing with some aspects of this proposition, the chapter and the book overall argue that sustainable development depends on elites playing an active role in establishing rules that promote good governance. In contrast, much economic and development theory asserts that international professional elites can directly influence economic and development outcomes. Many of the proposed institutional explanations of successful development of nations, such as pluralism, ensuring property rights and unbiased observance of the ‘rule of law’, are highly general. Changing these rules where they are deemed inadequate is a challenge that requires clearer understanding of both the nature of the rules and the role of the main actors in changing and implementing them. The institution of democracy itself requires a deeper understanding and strengthening; several critics recognize that democracy is not a finished product. Recent research, however, should help identify weaknesses and set directions for reform. Equally, we should not avoid looking at rules applied by directed capitalist countries, such as China and Russia and others influenced by state planning regimes. In this context, we look at the possibility and indeed the necessity of establishing a common core of rules for government across the globe. Most challenging of all, the chapter considers whether the current rules determined by hegemonic competition can be reformed to build stronger, more cooperative ways to ensure global security.